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2018 (4) TMI 1768 - AT - Income TaxDisallowance of interest expenditure u/s 57(iii) - whether the interest expenditure incurred by the assessee on the borrowed fund is an allowable expenditure under section 57(iii)? - HELD THAT:- There is no denial that the money borrowed by the assessee was given to the sister concerns on which the assessee has earned the interest though the said interest was less than the expenditure incurred by the assessee. In the case in hand the facts and purpose of taking loans and giving to the sister concerns is not in dispute and, therefore, merely because the assessee has earned less interest and paid more interest cannot be a reason for disallowing the claim of the assessee. What is required for allowing the expenditure under section 57(iii) of the Act is the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. In the case in hand there is a direct connection and nexus between the expenditure incurred on account of interest paid and the interest income earned by the assessee on the loans and advances given to the sister concerns. AO in the scrutiny assessment passed under section 143(3) for the assessment year 2013-14 vide order dated 30th March, 2016 has allowed the claim of the assessee though it was restricted to the income under the head Other sources. Therefore, the AO for the assessment year 2013-14 has accepted the expenditure on account of interest incurred for earning the interest income and accordingly allowed the claim of the assessee to the extent of interest income. In view of the above facts and circumstances of the case as well as the decisions as cited supra, we find that the disallowance made by the AO is not justifiable. Accordingly the same is deleted. - Decided in favour of assessee.
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